Originally Posted by Curmudgeon44
Please let me ask an elementary question: What does it mean when it "works"? Seriously I am getting confused by this and wanted to re-focus on the goal... Maybe we aren't all on the same page.
Long post warning. Thanks for reading, understand if not read fully.
Thanks to all posters for chiming in about what "works" and "doesn't work" mean. Most of the reasons are covered.
That said, thought some elaboration of what "works" for me is in order. I'm an infrequent poster but keep an eye out for threads on outsized tIRA(relative to networth) and Roth conversions on this outstanding message board. This particular topic caught my eye and especially the views of @brokrken.
Here's what @brokrken is doing really well,
- Planning for RMD at 48!
- Considering rate of return scenarios
- Not making future tax rate the top consideration
- Having a healthy nest egg already!
Here's my situation, @ 62 (numbers)
- Low probability of anything less than a 22% tax rate from now to RMD age
- Roth is 25% of net worth currently - opportunistic conversion in 2010 + supercharging via workplace Roth with 26K contribution limits during 2018-20
- Have little in after tax savings
- Rate of return over 10% since 2005 (model for less from here on)
- Retirement planning since 50; exactly mirrors @ brkrken - based on income needs versus cash on hand or tax rate or inheritance
- Plan to empty out tIRA by around RMD age- spend it down & QCD
- Live off ROTH post- RMD
Here's my approach to investing and everything else
- Rate of return primary focus - make what American Business makes
- Buy and hold investing in stocks
- Try very hard to pay close to zero in fees
- Zero belief in modern portfolio theory - asset allocation, balancing etc.
- Mentally prepared for a 50% temporary decline in net worth with a repeat of 2008-09, hold cash to live and ride out 2 years. Will always do.
- Will cheerfully pay taxes, having done well, especially in retirement years.
- QCD and taxes are in one bucket for me.
Used to not even think about this 15 years ago or earlier. Because I was obsessed with the thought "Don't have enough" to get through our own lives! Slowly as the investment approach started to work out, it went to "May have enough"; to "Have enough" and recently(cautiously optimistically) "Will have more than enough". So, passing on what's left to family is a recent consideration. I'm trying to learn from the most rational people on this subject. Both of us got nothing from our parents. We did okay on our own.
My own thoughts are that, given that I myself was living under "don't have enough" until about age 50, squirreled away every penny that we could, during our prime years (my age 30-50, spouse 25-45, kids 0-15). We were postponing spending on little luxuries like the nicer vacation, running cars to the junk yard, buying that jewelry for the spouse etc. All in order to overcome my own fear of "not having enough". For ex. we always maxed out on 401K's to the fed limit etc. What is the inheritance going to be worth to my family when they are 50 to 70 years of age after a life of postponing consumption at 0-45 ages
TL DR version, I really don't worry about leaving a large pile, let alone the tax implications for heirs. Based on my numbers outlined above, best outcome is that it's likely to be in Roth money, which allows (my best understanding), 10 years for heirs to draw down. That's good enough for me to stop breaking my head over this. If one of us passes before RMD, we increase QCD, pay taxes etc.
I post this with respect to all points-of-view around "What works". Each person's situation is unique and generalizations should not be attempted.